…Your credit score is made up of 5 parts with your credit history making up the biggest part at 35%. Negative credit like late payments, collections, charge offs, judgments, liens, and bankruptcy will lower your credit score. While paying on time over time will raise your credit score.
Here is what makes up your credit score:
* 35% – Payment(Credit) History
* 30% – Debt to Limit Ratio
* 15% – Credit History Length
* 10% – Types of Credit
* 10% – Inquiries
As you can see the bulk of your credit score is made up of payment history and debt to limit ratio. Your debt to limit ratio is how much you owe compared to owe much credit available you have. This will be covered in another article, but it is very important to create a budget and pay down your bills. We will focus on payment history and what you can do to improve it.
A good payment history is one that is always on time and has never been late. This means you have multiple accounts you have paid on for several years and there is no negative items reporting like mentioned earlier. Many people can get a good payment history without doing much, just making sure they pay everything on time. Many people can also get a bad payment history with out even knowing it. This can be caused for many reasons out of your control, but unfortunately now you are paying for it on your credit.
So if you have a bad credit history which would include late payments, collections, charge offs, judgments, liens, foreclosures, repossessions, and bankruptcies you need to fix your credit history. Only one of these items will lower your credit score more than all the good credit history that you have. You can remove bad credit 2 ways.
#1 Contact Your Creditor
You can contact your creditors and ask them to remove it from your report. This would include negotiating removal based on either good history with them or payment of the negative account. Some creditors have rules against negotiating and won’t even talk to you.
If you have a good payment history with your creditor besides maybe one late payment they might remove it just based on good faith. When a large amount is owed you can negotiate the amount and upon final payment the negative listing must be removed from your credit report. This will only work if money is owed and they are willing to negotiate
#2 Dispute The Credit Bureaus
You can dispute your negative items to the credit bureaus. The Fair Credit Reporting Act (FCRA) allows consumers the right to dispute anything on their report that they believe to be inaccurate or erroneous. This includes asking for verification of items that you want verified. These items can be legit or not, you can ask for verification either way
You must draft a dispute letter, stating what items you want verified and why. You send them to all bureaus that your listing is on which might include Equifax, Experian and Trans Union. The bureaus then have 30 days to verify your listing with your creditor. If the negative item isn’t verified it will be deleted from your report. Items can not be verified for many reasons, including misplacement, creditor doesn’t have account anymore, or human error.
These are both viable ways to fix your history and begin to get your credit back on track. It is also very important to work on all areas of your credit score including credit history length, debt to limit ratio, types of credit, and inquiries. Look for my other articles on all these areas of your credit score and how to improve them. The best thing you can always do to insure good credit is to pay on time every time. Continue reading →